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Company Response

3 Mar 2019

Author:
Laura Natumi McTavish, Responsible Investment Analyst, DNB, Norwary

DNB’s response to the Fair Action report “Broke in Bangladesh”

We have had extensive dialogue with Framtiden i Våre Hender to explain our position and how it would be presented in the report.  Unfortunately, we believe that the report’s conclusion does not accurately reflect DNB’s position and work with H&M.  We have worked with these issues for many years both directly towards companies and together with other investors.  It is also worth noting that we hold a small position in H&M (we own 0.01% of the company) and are not invested in any of the other companies mentioned in the report.

The topic of living wages is important, complex and challenging as there is no specific international norm to be breached and few countries have consensus on how much a “living” wage actually is.  In addition, it is also difficult to determine the root causes of living wages challenges, which are often systemic in nature. Consequently, we encourage companies to work in collaboration with key stakeholders, such as unions and government, to drive change at industry level and to enable appropriate country frameworks.  In Bangladesh in particular, due to the importance of the garment industry for exports, the issue is also highly political.  The solution to raising living wages is not as straightforward as “demanding that fashion brands share the costs of raising the wages with their suppliers” as there is no “one size fits all” approach and there are regional differences that must be accounted for.  For example, unions are not as powerful in China compared to other countries.

H&M is considered to be a leader within its industry when it comes to living wages.  H&M has published a strategy and goals, and works strategically to deliver on these.  We have engaged with H&M since 2011, when sustainable cotton, including wages,  was a thematic focus area.  Since 2011 we have identified, analysed and taken action in regards to living wages and working conditions in H&M’s supply chain.  H&M implemented its fair wage strategy on the back of such investor pressure in 2013.  Dialogues with H&M have generally focused on sustainability issues such as labour rights and human rights, including living wages, through investor initiatives and through our external engagement service provider.  We are and will continue to follow up H&M to see how they progress towards their targets, and to encourage ever increasing levels of transparency.

ESG issues in Bangladesh are not new to us.  Sustainable shipbreaking has been a focus area since 2017, where pollution, labour rights and human rights issues are all relevant.  We excluded four companies due to unsustainable shipbreaking practices in 2018.  Furthermore, living wages are also a challenge in other industries/regions.  We have been engaging on living wages and child labour in regards to cocoa supply chains since 2017.  Living wages will therefore continue to be an important theme in our thematic engagement on emerging markets supply chains in 2019.

 

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